Go to the Globe and Mail homepage

Jump to main navigationJump to main content

(Sean Kilpatrick)
(Sean Kilpatrick)

Federal deficit hits $36-billion Add to ...

Ottawa's budgetary deficit has ballooned to over $36-billion two-thirds into the fiscal year as the recession and its aftermath exert a heavy toll on spending and revenue, the federal Finance Department said Friday.

The latest Finance Department accounting shows that the government experienced another $4.4-billion shortfall in November, bringing the deficit eight months into the fiscal year to $36.3-billion

That is night and day from where the government stood last year, when it was clinging to a $39-million surplus.

Despite the big jump in November, the accumulated deficit so far puts Ottawa broadly in line with meeting its estimate of a record $56.2-billion shortfall by the end of the fiscal year, March 31.

The department said the deficit is almost entirely due to the impact of the recession: higher spending on things like employment insurance and the government's stimulus program and lower receipts from individual and corporate taxpayers.

"Revenues were down $18.3-billion, or 11.9 per cent, reflecting declines across most revenue streams," the department said.


"Program expenses were up $19.8-billion, or 15 per cent, mainly reflecting higher EI (employment insurance) benefit payments, higher transfers to other levels of government and support for the automotive industry."

Singled out, the government's stimulus package unveiled in last January's budget has so far cost Ottawa $13-billion.

In an address to his caucus Friday morning, Prime Minister Stephen Harper again stressed the need to keep the government stimulus spending - about $46-billion over two years - flowing until March, 2011, saying the economy remains fragile.

Noting that the government has been consulting with Canadians on the upcoming March 4 budget, Mr. Harper said "the message ... broadly speaking is clear."

"First, we must stay the course for now. The economic action plan has been working and we must see it through. Second, we have been told start planning now for deficit reduction when the recession ends."

To date, the government has not projected far enough ahead to where it shows a balanced budget. In the last year of the projections, 2014-2015, Ottawa will still be $5.2-billion in the red, according to the department.

Few economists accept the government's accounting, and Parliamentary budget watchdog Kevin Page estimated earlier this month that the deficit will likely be in the $20-billion range in five year's time.

Mr. Harper has said the March 4 budget, aside from outlining how it will implement the second half of the stimulus program, will also contain a road map for getting out of deficit, including a plan for reining in government spending.

Part of the challenge facing the government is that with the population aging, the growth potential of the economy is falling.

Bank of Canada governor Mark Carney said this week that the economy has begun to grow, but at a slow pace. Despite contracting 3.3 per cent during the recession, the economy is only expected to advance 2.9 per cent this year, which leaves it still smaller than before the downturn began in the fall of 2008.

In 2012, the economy may only be advancing by about two per cent, Mr. Carney said, which would limit Ottawa's ability to increase its revenue base.

The recession has shown how slow growth severely limits governments' ability to raise revenue.

The department said corporate receipts have especially been impacted, dropping close to 37 per cent during the first eight months, a shortfall of $7.4-billion from the previous year. About 46 per cent of that stems from Ottawa having to refund prepaid taxes.

Revenues from personal income taxes are down a more modest 7.8 per cent, worth $5.9-billion to the government.

The government is saving some money this year due to record-low interest rates. Despite a larger national debt as the deficit builds, payments on that debt have declined by $1.7 billion on a year-over-year basis, the department said.

Report Typo/Error

Follow us on Twitter: @GlobeBusiness

Next story




Most popular videos »

More from The Globe and Mail

Most popular